August 3, 2009

Asia Grain Outlook on Monday: Soy rise; low US supply, China demand

Grain prices rose across the board in Asian trading Monday, with soy posting the strongest gains amid a combination of tight U.S. supply and continuing robust demand from China.


At 0548 GMT, the November soy contract was trading at US$10.19 in electronic trading at the Chicago Board of Trade, having settled at US$9.82 Friday, amid a flurry of speculative fresh buying.


Bullish external market influences, notably weakness in the U.S. dollar, strong gains in metals, and a rise in crude oil prices to above US$70/barrel, continue to lend support, traders said.


Further upside appears very likely in coming sessions, despite the emergence of profit-taking Monday, with the market expected to continue focusing on robust buying by China and concerns over late-developing soy crops across some portions of the central U.S.


Any potential dip in prices in coming days will present a good opportunity to enter the market, analysts said.


A slow pace of soy development in key growing states of Illinois, Indiana, Minnesota and Ohio allows for a lot of elasticity in soy yield potential, making August weather conditions even more critical for final output.


As of July 26, the U.S. Department of Agriculture reported the percentage of soy crops in the blooming of stage of development at 63% compared with the five-year average of 76%.


Traders said with old crop supply at its lowest in 32 years, pulled down mainly by China's apparently insatiable soy appetite, concerns surrounding the new crop would likely provide a catalyst to push the market higher.


The Chinese government will again try to sell 500,000 tonnes of soy in major producing areas this week, the same volume as planned in the previous weekly sales, according to a statement published on the China National Grain and Oils Information Center's Web site Friday.


The government had planned to sell 502,700 metric tonnes of soy to north and northeast major producing areas last week, but no lots were done as high prices curbed bidding interest.


The result was in line with market expectations. Observers said local soy supply will remain tight until the government is able to release its soy into the market, and that the tight supply is supportive for futures prices.


In other regional grain news, Australia's Agribusiness AWB Ltd. (AWB.AU) Monday cut its estimated pool return on benchmark 2009-10 Australian Premium White grade wheat by A$15 a metric tonne to A$290-A$300/tonne, citing expectations of plentiful supply from the next crop.


Most official and private forecasts for Australian wheat production this crop year ending March 31, 2010 are in a range of 22 million-23 million tonnes compared with actual production of 21.4 million tonnes in the last crop year.


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